Support and Criticism of the CFP Board’s Proposed Changes to the Experience Requirement

Executive Summary

Last month, the CFP Board released proposed changes to the CFP certification experience requirement in order to earn the CFP marks. This weekend the comment period closed; in this blog post, I share the feedback that I submitted. What do you think about the proposed changes?

Dear CFP Board:

I am writing to express comments regarding the proposed changes to the experience requirement for the CFP certification. While I am generally supportive of the CFP Board’s efforts to refine and advance the experience requirement of the certification, the changes proposed to present a number of important concerns.

First and foremost, while I generally agree that it is valuable to make a distinction between the experience of doing financial planning, versus the experience of supporting, supervising, or teaching financial planning, the changes to the rules as proposed create several issues and concerns. First and foremost is that, simply put, I do not believe that 2 years of personal delivery of financial planning services is sufficient to develop the experience necessary to become a reasonable expert in the delivery of financial planning, such that granting the marks would be merited. In practice – especially for those who start into financial planning immediately with clients, with no prior job positions – the first year is often a very chaotic one, complicating by simply trying to learn the basics of actually delivering the craft, and more importantly by learning to develop relationships with prospective clients to even potentially deliver services in the first place. It is experience working with dozens and dozens of young planners through the NexGen group, I have witnessed that it is not uncommon for a brand new start-up planner to actually deliver fewer than half a dozen full comprehensive financial plans in the first year. Such little client volume is simply not sufficient to allow a planner to completely develop all of the remaining skillsets needed to effectively deliver financial planning in the second year of practice. Simply put, 2 years of personal delivery of planning is too short; the existing 3 year requirement is more appropriate. It is also notable that there appears to be both an industry and public perception that changing the current requirement from 3 years down to 2 years also represents an adverse “lessening” of the credible standard that the CFP Board has worked so hard to establish.

On the other hand, I do think it’s reasonable to make the distinction current proposed, between experience with the actual delivery of planning, and those who support, supervise, or teach financial planning. However, if the experience requirement for doing financial planning remains at 3 years, then the requirement to support, supervise, or teach, would then be extended to 4 years, to maintain the proposed differentiation in the current proposal.

If this distinction is maintained, though, it is also necessary to clarify how to evaluate the experience requirement for those who have a blend of experience in the different categories. For instance, if someone follows the “typical” financial planning progression, and provides support for 1.5 years, followed by “doing” financial planning for another 1 year, where does this leave the candidate? Even under the current rules, the individual has fewer than 3 years of total planning, but more than 2 years, which is at least partially composed of the personal delivery of financial planning? But what actually completes the experience requirement? The 2 years of blended experience? Or 3 full years? Does this effectively mean that an individual who does at least 1 year of supporting, supervising, or teaching financial planning, automatically must complete 3 years anyway, because it will take 2 more years just to be doing 2 years of financial planning delivery? What if the planner does 1.9 years of personal delivery, followed by 1 year of support? Is the planner still not eligible to complete the experience requirement? Does that mean the planner should have remained offering “personal delivery” of financial planning for one more month, to reach the 2-year mark? Even if there wasn’t actually a new comprehensive financial plan created or delivered in that time period?

I also found the implications of the proposed changes highly concerning with respect to the career track that it implies for financial planning. The typical candidate, upon completion of the CFP certification exam, typically seeks the “shortest” path to complete the experience requirement and obtain his/her marks. Under the current proposal, this will encourage prospective candidates to complete internships, practicums, and residency programs, as those provide accelerated experience credit (which is good). However, candidates would also implicitly be discouraged from taking a job in an established financial planning firm in any role that merely “supports” financial planning but is not responsible for actual delivery – because a support job extends the experience requirement from 2 years to 3. Ironically, this means a planner who might obtain a quality support job, earning experience constructing potentially dozens of financial plans, in a quality supervised and supported environment, will instead be encouraged to “hang their own shingle” and instead spend the time trying to grow a business and develop clients from scratch, doing what is typically an incredibly small number of actual financial plans in the initial year. In the end, this means that an individual who is “doing” planning might receive the marks after 2 years, despite creating and delivering no more than 10-20 comprehensive financial plans (in an environment that may have little mentor support, supervision, or any guidance regarding refinement and quality, except to whatever vague minimum is necessary to support an attester’s signature), while an individual in a support role who creates 50+ comprehensive financial plans over the same time period, and potentially has at least some interaction supporting the personal delivery of the plan as well, is deemed to require another year of experience. Notably, most established planning firms themselves are so cognizant that brand new planners with no other experience are “not ready” to work directly with clients, that the natural career path in larger independent firms is already to spend a period of 1-2 years supporting financial planning before having a material amount of direct client interaction and personal delivery of planning. In the established history of virtually every profession, “apprenticeship” is a natural path to mastery of a craft, from tradesmen to the residency program of medicine, and the associate accountant or associate lawyer positions in the professions of accounting and law; I would urge the CFP Board to establish an experience requirement that encourages individuals to take on support roles as a part of their professional development, and rewards them for such a path (as the current proposals do for internships, practicums, and residency) as many existing and establish firms already do in common practice, rather than implying that the best way to professional status after schooling and a limited amount of the aforementioned programs is to hang one’s own shingle in a mostly unsupervised and unsupported environment to learn their craft from scratch on live patients/clients. Because in reality, given the reluctance of many firms to allow young new planners to work directly with clients until they have established some additional experience simply supporting financial planning (as an “apprentice”), planners who wish to complete the experience requirement in only 2 years will be naturally driven away from the most supportive mentoring firms (that don’t allow new prospective planners to personally deliver financial planning to clients in year 1), or will help firms who unleash unprepared prospective planners directly on clients to have a hiring advantage over those firms who wish to provide a slower – albeit more supported – development path that forces another year of experience to earn the marks. Perhaps this means a further distinction should be made between the value of supporting the delivery of financial planning – a natural career path for apprenticeship in all professions for a millennia – as opposed to the supervision (ostensibly, in a regulatory or management capacity?) or teaching financial planning.

On a final note, I would point out that note only do I support the CFP Board’s proposal to reduce the qualifying window from 10 years prior to a successful exam date down to only 5 years, but I hope this will continue further down a path of shortening the qualifying window for experience prior to the completion of the CFP exam. In no other established profession does experience an individual gains before they are even fully educated as a professional count; surely, we would find no credibility in a doctor who spent 3 years doing internships in a hospital, who THEN went to medical school, got a medical degree, and claimed that he was ready to be a practicing doctor due to the experience he got as an uneducated intern prior to his actual medical studies. While I realize that in the current environment, there are in fact individuals who have established significant financial planning experience before completing the exam, due to the existing career paths in financial planning and the availability of other educational programs, I would hope that over time this qualifying window of prior experience would continue to narrow. Ultimately, only experience that was earned during the educational process, or after the educational process, should actually count as qualifying experience for the CFP certification – again, the goal simply being to mimic any other profession, which appropriately realizes that experience obtained before an individual has actually been trained in his/her craft and received the appropriate education cannot genuinely be a full level of professional-certifying experience.

Beyond the comments expressed here, I am in full support of the remaining proposed changes to the CFP experience requirement, including the current experience adjustment associated with the qualifying window, the restriction on teaching experience in a registered program, and the updated attester requirements.